New Directions in Wine

Wine is continuing on its upward trajectory in 2013, its momentum fueled by ongoing product innovation, a shift to higher-priced offerings and highly engaged consumers, not to mention the creativity that retail and on-premise operators are employing to showcase the category. The dynamics of the current wine market are such that marketers of beer, and to some degree spirits, are feeling a competitive threat.

Wine grew 2.2 percent in volume and 2.2 percent in retail dollars in 2012, according to our Wine Trends in Adult Beverage (TAB) report, and we project similar performance for the category in 2013. As we head into the all-important fourth quarter, industry pros are looking for cues as to how the year will finish. Our recent research unveils a few trends that likely will contribute to wine’s ongoing growth:

Operators are thinking outside the bottle. Wine kegs are now legal in 49 states—Florida joined the club earlier this year; Utah is the lone holdout. Wine on tap is a trend in restaurants and retail outlets that feature tasting bars. Kegs hold as many as 26 bottles of wine, keep wine fresh for several weeks after tapping, and reduce needed storage space and waste, both in terms of liquid loss and glass bottle refuse. Premium and above-premium wines are moving toward keg packaging. Concannon Vineyard announced last week that its Conservancy Cabernet Sauvignon is now available to on-premise operators nationwide in 19.5-liter stainless kegs. A range of operators are embracing the option, including Truxton’s American Bistro in Los Angeles, which serves wine only from casks, and Chicago hot spots Paris Club and Tavernita. Each operator has reported that its consumers are receptive, especially once they taste the wines. Wine in kegs is poised for expansion, but on-premise operators of course will need to work out the logistics of bringing in and then managing keg systems, and finding ways to work with (or around) distributors that deal only in bottles. Nonetheless, this is a trend operators are getting behind, as the recognize the point of differentiation and the operational benefits it can provide.

Sparkling wine growth continues. Champagne and sparkling wine outperformed the total wine industry in 2012, growing 4.7 percent, according to Technomic’s WineTAB report, and are well on their way toward another a banner year in 2013. Consumers are tapping into bubbly: Champagne and sparkling wines are ordered once a month or more often in bars and restaurants by more than a quarter (27 percent) of consumers surveyed, according to WineTAB, with 21- to 34-year-old consumers significantly overindexing at 43 percent. With respect to at-home occasions, 23 percent of consumers enjoy sparklers once a month or more often. Again, consumers 21 to 34 overindex on frequency (34 percent). And it’s not just special occasions for which they’re choosing sparklers; approximately one-third of consumers report they’re as likely to sip bubbly wines on weekdays as on weekends both on-premise and at home. The fact that Millennials are embracing sparklers and that these wines are breaking out of the special-occasion pigeonhole bodes well for the category’s ongoing expansion. What’s more, sparklers are going hip. Bronco Wine recently announced its engagement of hip-hop artist Warren G. to promote its Allure brand.

Specialty wines soar and hybrids fuel the hype. Chocolate wines and wines such as sangria that involve fruit other than grapes surged in 2012. The segment known as specialty wines expanded 8.4 percent in 2012, according to WineTAB. While specialty wine is still a relatively small segment, its growth demonstrates that today’s consumer is increasingly accepting of wine mixed with other flavors. To that point, hybrid products that combine other adult beverages with wine also are making waves. Smoke liqueur marries vodka, Moscato wine and coconut and pineapple juices, while Blue Moon Vintage Blonde introduces Chardonnay grape juice to the Belgian white beer. More cross-category matches are surely on the way.

Opportunity in the Hispanic demographic abounds. Much has been said and written about Hispanics lagging in wine consumption, but our soon-to-be released Special Trends in Adult Beverage (TAB) Report: Hispanic Consumer Insights reveals that Hispanics consider themselves more knowledgeable about wine than the general population considers itself. In addition, Hispanics are a strong demographic for off-premise wine consumption. Hispanics’ wine knowledge points to a missed opportunity. Savvy operators can strategize to grow on-premise wine sales by engaging Latino consumers with the category. Given the growth projections for this demographic cohort and some of the other behaviors illuminated in our Hispanic study, marketers and operators alike should take a closer look at Hispanics and wine.

These are just a few of the elements propelling wine to end 2013 on a high note. Challenges exist for the category, primarily in the form of softening at the lowest price tier and supply constraints. The plethora of products coming to market also presents some issues for distributors and with regard to space allocations. However, wine opportunities abound, and recent metrics point to more growth to come.

A veteran of the foodservice industry, Donna Hood Crecca leads the firm’s Convenience Store Practice and is active in its Adult Beverage Practice. She develops research-based insights and recommendations for leading and emerging supplier and operator companies to enhance their go-to-market and product development programs and strategies.

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